Nintendo is counting on a strong launch for the Wii U next month to help return the company to profitability this fiscal year, but the hardware itself isn't going to contribute anything to that bottom line. Nintendo has revealed that the Wii U will be sold below cost in order to attract more potential customers for what it hopes will be stronger-than-normal software launch sales.

"Rather than determining a price based on [the Wii U's] manufacturing cost, we selected one that consumers would consider to be reasonable," Nintendo President Satoru Iwata said in an investor conference call yesterday. Iwata didn't say how much of a loss the company would take on each system it sells, but he did indicate that the projected write-off from Wii U hardware is a big part of why "we cannot say that we will achieve 'Nintendo-like' profits within this fiscal year." Just yesterday, Nintendo slashed its profit forecast for the year by 70 percent, thanks in part to weaker than expected 3DS and Wii sales in the first half of the year.

Selling hardware at a loss is relatively common in the game industry: both the Xbox 360 and PlayStation 3 lost money when they were first put on the market, despite starting prices of $400 and $500, respectively. But Nintendo systems have recently been the exception to this rule: the low-powered Wii made a profit at its launch price of $250, and the 3DS was also profitable when it launched last year.

Of course, Nintendo stopped making a profit on the 3DS when it was forced to drastically cut the system's price just three months after launch to help slower-than-expected sales. The portable hardware has just recently returned to profitability, Nintendo said, thanks to lower component costs. Given that recent history, perhaps it's not surprising that Nintendo has decided to launch the Wii U at a below-cost price right out of the gate, rather than risking another embarrassing rapid price drop.

Expenses related to the Wii U's touchscreen-equipped GamePad seem to be a major contributor to the Wii U's overall manufacturing costs as well. While individual GamePads won't be available at launch in North America, they will be sold a la carte in Japan for ¥13,440 (about $172), or more than half the total price of a system and GamePad together.

Nintendo is optimistically projecting that it will sell an average of 4.4 games for each of the 5.5 million Wii U systems it expects to sell before the fiscal year is over in March. Those kinds of quick software sales will be important to make up for any accumulated hardware costs for the year, which the company has already written off as the system started production this fiscal quarter.

An attach rate of 4.4 out of the gate would be high but not out of the realm of possibility for the Wii U. Microsoft averaged 3.9 games per Xbox 360 just after the system launched in 2005, but the Wii only averaged 3 games per launch system, and the PS3 saw a paltry 1.5 games for each launch hardware unit sold. Everything is going to depend on how consumers react to the lineup of 50 launch window games Nintendo has revealed for the system, a list that is dominated by warmed over ports among a few promising original games.

Regardless of bottom line losses on hardware, it seems the price Nintendo has set for the Wii U isn't keeping away launch customers. Pre-orders for the system are sold out across major US retailers, leading to ridiculously inflated prices on auction sites. Nintendo says Gamestop already has a waiting list of 250,000 people asking to be notified about Wii U availability after its pre-order allocation is spoken for.

And Iwata is even optimistic that the original Wii will still be able to find new customers this holiday season after a recent $20 price cut to $130. "Since people will have time to enjoy family gatherings at the end of the year, we believe that Wii and Wii U will attract different consumer segments without cannibalizing each other," he told investors. That seems like a stretch to us—we find it hard to imagine the potential Wii customer who was just waiting for the system to break that mythical $140 barrier—but it might be Nintendo's best hope to actually juice its profits in what's shaping up to be a critical year for its financial future.

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Kyle Orland
Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in the Washington, DC area. Emailkyle.orland@arstechnica.com//Twitter@KyleOrl

The problem is pricing games at $60 each, no discount on the hardware is going to make that attractive in a world where the mobile phone app stores sell games for far less.

Not to say that mobile app market pricing doesn't have an effect on console/PC gaming prices, but they're still totally different markets. Angry Birds isn't a direct competitor with the next Super Mario, and their pricing schemes have very little to do with each other.

It would be nice if the article mentioned the retail price for the Wii U: $299, or $349 for the Premium.

Nintendo is way off. Don't see how they can get an attach rate that high, when their lineup isn't all that impressive. I personally have no interest in their systems - too many re-releases of the same first-party games and retreads of Mario & friends.

</fanboi rage>I'm probably one of the very few people actually really excited about the new system. I can't wait to see a Zelda or a Metroid released on it. The problem though is it is going to be a while before that happens. What would be nice though is if a Pokemon or Smash Bros. came out quickly to hold me over until they do. The problem is that I'm actually getting a bit tired of Mario games. Blasphemy, I know, but sometimes it seems like that's all Nintendo wants to do it push out more and more generic Mario titles. I'm not saying that they're bad, but honestly, Mario and Sonic Olympics? Really? Where's a new Paper Mario? Hell, if Nintendo and Square could settle their differences, a new Super Mario RPG would be amazing!

I hope that the WiiU does well, because I'd really hate to see Nintendo relegated to Sega status (only a software company) because I think that Nintendo is currently the only company willing to try new hardware ideas. If it wasn't for the DS, the Vita more than likely wouldn't have had such a touch screen focus. If it weren't for the Wii, there would be no Kinect or Move. I'm not saying EVERYTHING Nintendo has done hardware wise is the be-all and end-all when it comes to hardware innovation, I'm just saying that the other groups seem to only want to stick to what has already been done before.

I'm sure I'm not the only one who would jump at the chance of buying a Nintendo built Android phone - something I can make calls on, has cell access, but can also play DS/Nintendo games.

I grew up playing Nintendo handhelds and consoles. I've since graduated college and would like to keep playing, but I'm not going to carry around a DS as well as a phone.

Why should we have to buy a specific piece of hardware?

Time for Nintendo to start working cross platform like Sega did. They could even sell premium hardware accessories. I can see it now, a bluetooth nintendo controller with a built on phone cradle so a user could hold the controller and the back of the controller would hold the phone, allowing a portable phone based gaming mechanic.

The problem is pricing games at $60 each, no discount on the hardware is going to make that attractive in a world where the mobile phone app stores sell games for far less.

Not to say that mobile app market pricing doesn't have an effect on console/PC gaming prices, but they're still totally different markets. Angry Birds isn't a direct competitor with the next Super Mario, and their pricing schemes have very little to do with each other.

Fair point, I'm just a little tripped up by I guess what might end up being an edge case, the ability to use the gamepad on its own. Am I misunderstanding how the system works, you still need to be at home when just using the gamepad?

An attach rate of 4.4 out of the gate would be high but not out of the realm of possibility for the Wii U.

Not out of the realm of possibility but out of the realm of the past history of the most recent console generation, right? Frankly, has any console ever had that high of an attach rate right after release?

One way to accomplish this would be to only sell Wii U bundles of 4 items, and consider anything sold with it to be attached (extra controller, screen wipe hanky, rechargeable battery, pocket lint) + Super Mario Bros Wii U = 5!

I'm also dubious about the Wii U pre-order. I can just imagine tons of people trying to make a fortune on reselling one before Christmas. I'm going to be interested in the average ebay price 2 weeks after release and on January 2nd as well. Surely, not all of the pre-orders are ebay resellers, but some have to be.

I grew up playing Nintendo handhelds and consoles. I've since graduated college and would like to keep playing, but I'm not going to carry around a DS as well as a phone.

Did people ever carry around portable game consoles in the same way as they carry phones? Maybe it's because I'm a bit on the small-side, but I can't think of any handheld games machine I've owned that would fit in a pants pocket (with the notable exception of the Gameboy Micro).

In the days of the original Gameboy, it was something I'd throw in my school bag (in a case, along with a handful of games). It certainly wasn't pocketable. These days with the 3DS, I throw it in a briefcase or in the car, ready for idle moments when I'm away from home.

I don't think handheld games machines have ever been pocketable and portable in the same way as phones, and I think that any phone-handheld combination with real console-style controls would be an exercise in compromises (e.g. sidetalking).

The real issue is that in moments of idleness, a phone is more handy than a handheld console ever was. You're in the airport, checking your email and Facebook on your phone, and decide to fire up a casual game while you wait for the boarding call. For me, it's a different type of gaming that doesn't replace what the 3DS has to offer totally, but occasionally stops me from reaching into my bag to get the 3DS out.

I don't think the answer lies in Nintendo building a phone. Gaming is pretty much bottom of the list of priorities when I'm shopping for a phone, and most of us are already invested in a phone ecosystem. The answer is to keep making addictive games, and to assist third-parties in doing so. If I'm in the midst of an engrossing game, I'm a whole lot more likely to put the phone away and grab the DS out in moments of idleness.

I haven't seen anywhere what the games cost, but $50/60 games are far too rich for me. I've especially been burned in the past with Wii games.

This always gets me. People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984. Games have much more expensive budgets today, and inflation adjusted, we're buying games at basically half the price we were back in 1984, but people complain it costs way too much.

How many game developers have gone bankrupt in the past year?

And then you wonder why companies use turning to DLC and other such tactics to make more money?

People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984. Games have much more expensive budgets today, and inflation adjusted, we're buying games at basically half the price we were back in 1984, but people complain it costs way too much.

Sure, there is plenty room for expensive games these days. Many people appreciate the quality and value. But the Wii U isn't targeted at gamers looking for AAA titles. It's targeted at families and casual gamers.

In 1984 the competition was dropping quarters in machines. Today the competition is freemium games and high quality games going for a few bucks. Is a 60$ casual or party game worth it? That's a whole different question.

This always gets me. People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984.

So? Why should the past cost of the game matter at all? The market is saturated with great games and ways to play them. Supply and demand.

[quote]Is a 60$ casual or party game worth it? That's a whole different question. [quote]

It's a great question. On the DS for example, you had lots of casual games being mixed with AAA games, all at $35-$40. Now, casual games are super cheap on phones, and multiplayer/MMORPG F2P is common (albeit phone and PC). Your $40 has to provide something compelling, not just exist.

Nintendo and Sony has a serious bridge to gap in this area on their handhelds. Their consoles won't be hit quite as bad, but expectations of quality/dollar is on the rise.

This always gets me. People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984. Games have much more expensive budgets today, and inflation adjusted, we're buying games at basically half the price we were back in 1984, but people complain it costs way too much.

Markets change, old figures don't matter. Half the cost is still too expensive. Penny-arcade said it best:

People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984. Games have much more expensive budgets today, and inflation adjusted, we're buying games at basically half the price we were back in 1984, but people complain it costs way too much.

Sure, there is plenty room for expensive games these days. Many people appreciate the quality and value. But the Wii U isn't targeted at gamers looking for AAA titles. It's targeted at families and casual gamers.

In 1984 the competition was dropping quarters in machines. Today the competition is freemium games and high quality games going for a few bucks. Is a 60$ casual or party game worth it? That's a whole different question.

I thought the joke there was "it takes more than 40 $0.99 iPhone games to equal one Nintendo game".

Not to mention that Infinity Blade is a poor substitute for Skyrim. There's a reason why AAA games cost that much. Granted, I'm having more fun with indie games than with the big-budget ones BUT none of those AAA games I'm talking about are from Nintendo. The Spaghetti Monster knows damn well if there's one thing the big N excels at is Single player games and for a hermit like me that's perfect.

Hello internet. My how the logic that floats around you is just icky. How many times has Nintendo died? Like 10 to the 25th power times now? Psst... Hey let me fill you all in on something cool. If you compare 3DS sells to DS sells of the same comparable time frame, you'll find that the 3DS is actually outselling the DS. Simply put, the 3DS is selling faster than the DS. We'll be heading towards the end of year 2 for the 3DS around March 2013 and it's already sold over 20 million units. It's floating around 22 million units and it's sold around 5 million just this year alone. Yeah so where is this BS smartphones are killing off Nintendo coming from? Really bad BS journalism in which you reach up into your behind and pull out BS and then bash on what ever company seems to be the one that everyone bashes on.

SMARTPHONES SELL REALLY REALLY QUICKLY BECAUSE THEY ARE "PHONES"!!!!!!!!!! They aren't portable gaming devices, they are phones first. I would bet the entire world that the majority of smartphone owners bought their smartphones for either; A. as a phone or B. a status symbol.

Okay so if Nintendo should follow Sega then Apple should stop making their products and allow for HP, Dell, Acer, Toshiba, etc. to put their OS on computers build by them... The logic doesn't make sense, see. Why should Nintendo stop doing something that is making them money?

Sure the Wii U will be sold at a loss but guess what, Sony and Microsoft do that as well. The difference? Sony made a huge mistake by over pricing the PS3 and have been taking a loss on it, hence the 10 life cycle, and Microsoft probably could have pulled it off had they actually bothered to make sure that the design of the 360 wouldn't become a meltdown causing them to sink billions of dollars into fixing the problem. How often does one buy a Nintendo console just to have it break a year later, heck maybe even days later (laugh laugh, reference to 360). I'm still running my launch Wii just fine. My launch N64 is still running perfect even though it's very filthy. The point is, Nintendo builds to last and as long as the loss per Wii U isn't to big, they should be able to recover from it.

astropheed wrote:

enderandrew wrote:

This always gets me. People think $50 is far too much for a game in 2012, but people seem to forget that brand new NES games were $50 back in 1984. Games have much more expensive budgets today, and inflation adjusted, we're buying games at basically half the price we were back in 1984, but people complain it costs way too much.

Markets change, old figures don't matter. Half the cost is still too expensive. Penny-arcade said it best:

Just because it's on the net doesn't make it true. Here's the big difference between those cheapy little $1 app games and $40 and $60 games. You can buy 40 games but chances are you'll get rid of a pretty big chunk of them after a week or so once you're done playing them. There is no gurantee that there is quality within those games. From time to time I'll find a free game or one of these $1 games and I'll bite but eventually I loose interest in it pretty quickly. Especially games like that Smurf village game. Do this, wait this long, come back, level up after 5 days, repeat. It's so painful and I can usually stick it out but I'll lose my interest in it and may never go back to it. I bet you most people will find this. They find something they like at first but then they get rid of it soon after getting it.

Now $40-$60 games, they tend to have a lot more tender love and care put into them. Of course there will be the rotten game here and there, any medium has that problem. These games can last from a few days to weeks. Of course the physical controls help, I've always found virtual controls on phones to feel really clunky and just plain awful. I always find myself returning to these games to replay them cause they're fun and really pique my interest. I do find app games like that from time to time but it's not that often. Now someone mentioned DLC. If done correctly, it can extend a game's life. Of course you have EA who thinks locking content on a disk and then selling you a code to unlock it is DLC, but it ain't, it's cheap. Nintendo on the other hand has stepped into this realm now with NSMB2 by offering new packs for coin rush mode. I have to say I love the first three packs that were released and can't wait to get the two new packs that released today.

Nintendo can expect to be losing more money until they get their act together and allow developers create network-able games.

I'm also curious about how Nintendo's backwards compatibility is going to work this upcoming generation. It seems from the wiki page that it might be going the 360/PS3 Fat 80GB route by only having software emulation versus hardware emulation like the Fat 60GB PS3 does.

So to the uninitiated, that means to expect more than a handful of games to either have glitches or to be non-functional at least as far as backwards compatibility with the Wii goes.

I dunno how they will actually perform, but is it just me or is Nintendo being a bit too optimistic. Its always better under-promise and then over-deliver imo.

That might be a good personal policy but that's not wise for a company. If you're too pessimistic, you risk losings investors, developers, stock value, etc.

I really do wish Nintendo the best in this launch. If the pre-orders are any indication, it shouldn't be too bad. Honestly, I'm debating selling mine after hearing what they're fetching on ebay and I'm NOT the "buy hot item and sell for a profit" type.

astropheed wrote:

Markets change, old figures don't matter. Half the cost is still too expensive. Penny-arcade said it best:

I wouldn't say the market has "changed" as much as new markets are buying video games. Maybe junky little 99 cent games are fine for the more casual crowd but I'd happily drop $30-60 if I think the game is worth it. The remastered Ocarina of Time alone made my 3DS worth it and I'm not alone.

Markets change, old figures don't matter. Half the cost is still too expensive. Penny-arcade said it best:

that comic is absolutely correct.

How? 40 pieces of crap is just a lot of crap.

I suspect you are conflating "I don't like $0.99 games" with "$0.99 games are crap". Mobile app stores have quite a range of prices and quality at this point. I'm not a particular fan of mobile gaming (AAA on my 32" is how I roll) but I've seen a number of $0.99 games that are obviously not crap.

Markets change, old figures don't matter. Half the cost is still too expensive. Penny-arcade said it best:

that comic is absolutely correct.

How? 40 pieces of crap is just a lot of crap.

I suspect you are conflating "I don't like $0.99 games" with "$0.99 games are crap". Mobile app stores have quite a range of prices and quality at this point. I'm not a particular fan of mobile gaming (AAA on my 32" is how I roll) but I've seen a number of $0.99 games that are obviously not crap.

I guess it depends on how you define "crap". Relatively speaking, yes, they are crap. They're games that I can make by downloading a couple-hundred dollar app on steam and spending my free time over the course of 5 or 6 weekends to create. They're not games with multi-million dollar budgets and development teams numbering in the multiple-hundreds of people. They're not games that push the boundaries of current-day hardware, or attempt to create new game play or graphic arts innovations. They're not games that you tell stories to your friends about. They're crap. The fact that I don't like them merely stems from the fact that they're crap, not the other way around. The fact that you (and millions of other people) DO like them doesn't change the difference in relative effort put into the game, nor does it change the amount of money people have to charge for the game just to make up their development costs.

I guess it depends on how you define "crap". Relatively speaking, yes, they are crap. They're games that I can make by downloading a couple-hundred dollar app on steam and spending my free time over the course of 5 or 6 weekends to create. They're not games with multi-million dollar budgets and development teams numbering in the multiple-hundreds of people. They're not games that push the boundaries of current-day hardware, or attempt to create new game play or graphic arts innovations. They're not games that you tell stories to your friends about. They're crap. The fact that I don't like them merely stems from the fact that they're crap, not the other way around. The fact that you (and millions of other people) DO like them doesn't change the difference in relative effort put into the game, nor does it change the amount of money people have to charge for the game just to make up their development costs.

If you want to define "crap" as "not a PC/console AAA game" then ... okay. I took it as a description of quality (and I know you didn't write the original post I replied to).

As I said originally, I DON'T like mobile games. Still, setting aside my personal preferences, I can recognize there are many with a high level of quality.